Consider a loan for $100,000 to be repaid in equal installments at the end of each of the next 5 years. The interest rate is 8% compounded annually. What is the remaining balance of the loan after 2 years?
A. 64,005
B. 74,954
C. 64,545
D. 25,046
E. 49,909
Help please :)
STep 1 Calculate the Annual payment required i.e. EMI
PV = Annual payment x cumulative disounting facto @8% for 5 years
100000 = AP x 3.99271
AP = 25045.6457
Step 2 draw Amortization table:
Opening Balalnce | Annual Payment | Interest @ 8% on Opening balalnce | Principal portion Annual payment - Interest Portion |
Closing balance Opening - principal portion |
100000.0000 | 25045.6457 | 8000.0000 | 17045.6457 | 82954.3543 |
82954.3543 | 25045.6457 | 6636.3483 | 18409.2974 | 64545.0569 |
64545.0569 | 25045.6457 | 5163.6046 | 19882.0411 | 44663.0158 |
44663.0158 | 25045.6457 | 3573.0413 | 21472.6044 | 23190.4114 |
23190.4114 | 25045.6457 | 1855.2343 | 23190.4114 | 0.0000 |
As it is clear from above option C is correct
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